Somerfield, the grocery chain part-owned by the property tycoon Robert Tchenguiz, is up for sale and could change hands for as much as £2.5 billion in an auction being conducted by Citigroup.

There have been at least three expressions of interest for the 955-store group, which was bought by a consortium comprising Mr Tchenguiz, Barclays Capital and Apax Partners, the private equity firm, for £1.8 million two years ago.

Those interested are thought to be the rival supermarket groups J Sainsbury, Wm Morrison and Asda, all of which are keen to increase their store numbers to compete with Tesco, the market leader. Waitrose, which has ambitious expansion plans to double in size, could also be a potential buyer.

There was speculation last night that Marks & Spencer could also enter the fray. It has stated ambitions to expand its food business and considered a move for Sainsbury’s last year.

A source told The Times last night that interested parties were being asked to sign confidentiality clauses. Another source said that John Lovering, the Somerfield chairman, had been actively touting the business.

The owners are understood to believe that they can at least double their £500 million equity investment, which would value the company at more than £2 billion. Nevertheless, the timing of the auction will prompt concerns over the health of the Somerfield business, Britain’s fifth-biggest supermarket chain.

Senior bankers had been predicting that consolidation in the retail sector would begin only in the second half of the year, given fears of an approaching recession.

Mr Tchenguiz was forced to shelve a refinancing of Somerfield last year because of the deteriorating debt market. An auction would spark speculation that Mr Tchenguiz has decided to cover his substantial losses in Sainsbury’s and Mitchells & Butlers by seeking an exit from Somerfield. He has lost millions after a failed takeover attempt by the Qatari Investment Authority for Sainsbury’s in November. He has also been hit by problems at his £4.5 billion joint venture with the pub group Mitchell & Butlers.

It is thought that Citigroup has been briefed to sell the company as a whole, but most potenial buyers are likely to be interested only in parcels of stores.

Experts believe that it would be impossible to seal a deal before the Competition Commission reports the results of its fourth investigation into the sector.

Somerfield, which last night declined to comment, has been trying to carve a niche by focusing on the local grocery market rather than competing with the big chains. Its private equity owners have carried out a restructuring of the business since the takeover. Somerfield slimmed its stores portfolio, selling off about 600 shops, including 225 Kwik Save discount outlets. It also reduced head-office jobs from 1,800 to about 800 and closed six out of ten distribution centres.

The Somerfield group emerged from a series of mergers in the 1970s and 1980s. It absorbed chains such as Keymarkets, International Stores, Fine Fare and Gateway. The first shop under the Somerfield name opened in 1990.

Citigroup declined to comment.

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